Exclusion Screening

Changes to Fraud and Abuse Laws in the Healthcare Industry


Emptech's founder, Jeff Aleixo


Jeffrey Aleixo

Fraud and Abuse Laws Healthcare Industry

Regulations in the healthcare industry change constantly. Nearly 18 months after the Department of Health and Human Services (HHS) announced its Regulatory Sprint to Coordinated Care, the Centers for Medicare & Medicaid Services (CMS) and the HHS Office of Inspector General (OIG) published the proposed changes. These proposals represent the most significant effort within the healthcare industry regarding the promotion of a value-based healthcare delivery system.

Understanding Fraud and Abuse Laws as Key to Compliance

The healthcare industry is a highly regulated one, and federal and state agencies continually put their efforts into eliminating instances of fraud and abuse. Therefore, it is critical for every healthcare provider and organization to closely review the applicable standards and adhere to different regulations.

There are five dominant federal laws aimed to protect payers and the public from fraudulent practices and self-referrals: the False Claims Act (FCA), the Anti-Kickback Statute (AKS), the Physician Self-Referral Law (Stark law), the Exclusion Statute, and the Civil Monetary Penalties Law (CMPL).

False Claims Act

Knowingly making a false record or filing a false claim regarding any federal health care program is a violation of the False Claim Act. The Act refers to any plan or program that provides health benefits and is funded by the United States Government or any state healthcare system. Even unknowingly submitting a false claim to Medicare or Medicaid is considered a potential violation.

Anti-Kickback Statute

The federal Anti-Kickback Statute is one of the best-known fraud and abuse statutes because of its wide-ranging effects on business relationships in the healthcare industry. The AKS prohibits transactions intended to induce or reward referrals for items or services reimbursed by the federal healthcare programs.

Physician Self-Referral Law

This legislation prohibits physicians from referring patients for designated health services (DHS) payable by Medicare or Medicaid to entities where the physician or an immediate family member has a financial interest. Although the financial penalties may be even greater than with the AKS, these are non-criminal charges.

Exclusion Statute

According to the Exclusion Statute, certain individuals or entities can be banned from participating in Medicare and other federal healthcare programs. The OIG maintains a list of excluded individuals and entities and healthcare providers are required to ensure that employees and contractors serving in any capacity are not on this list.

Civil Monetary Penalties Law

The Civil Monetary Penalties Law (CMPL) authorizes the HHS to impose civil money penalties and/or exclude from the Medicare and Medicaid programs physicians who commit various forms of fraud and abuse involving Medicare and Medicaid.

Stay up-to-date with rules, regulations, and standards in the healthcare industry, and find the best way to ensure constant healthcare compliance with this detailed guide.

Modernizing Fraud and Abuse Laws

In October 2019, the HHS released proposals to modernize the regulations under the Stark Law and Anti-Kickback Statute. The aim of these proposals is to remove regulatory barriers to effective care coordination and management. The main part of the proposed changes is a set of regulatory protections for value-based arrangements. Such arrangements are intended to improve quality outcomes, lower or reduce the growth in costs, and increase health system efficiencies through care coordination.

The proposed protections include new Anti-Kickback Statute safe harbors and new Stark Law exceptions. The safe harbors and exceptions are determined according to the level of financial risk assumed by the parties. Therefore, those parties that assume greater downside financial risk for the cost of patient care and quality are provided greater flexibility by the OIG under the proposed rules.

The Anti-Kickback Statute safe harbors provide regulatory protection for certain value-based arrangements and foster better-managed patient care. These safe harbors protect the exchange of money and in-kind remuneration between parties to value-based arrangements and include value-based arrangements:

  • Care coordination arrangements,
  • Value-based arrangements with substantial downside financial risk, and
  • Value-based arrangements with full financial risk.

The OIG also proposed additional safe harbors for arrangements, such as the provision of tools and supports for patient engagement, CMS-sponsored models, and protecting donations of cybersecurity technology and services.

Stark Law exceptions are designed to remove barriers to value-based arrangements and encourage a transition to value-based payment models. The changes refer to Medicare beneficiaries, non-Medicare patients, or both, and apply to:

  • Full financial risk,
  • Meaningful downside financial risk, and
  • Value-based arrangements generally.

Proposed Rules’ Effect on the Healthcare Industry

The proposals represent the agencies’ attempt to encourage and further incentivize the shift from volume-based health care delivery and payment systems to value-based health care delivery and payment systems. They represent a step forward in promoting efficiency and innovation. As such, they are aligned with the current Administration’s efforts to promote coordinated care in the healthcare industry.

It remains to be seen in what form these proposals will be finalized and how the healthcare industry might structure certain arrangements once these additional protections are in place. Given the broad scope of the proposed rules and the great potential for these regulations to shape the healthcare industry, providers and organizations need to take the necessary steps to adhere to them. One way healthcare providers and organizations can ensure compliance is through the integration of automated tools. This allows them to effectively gather and manage data, reduce potential risks, and set higher standards when it comes to adhering to the OIG proposed rules and standards.

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